European banking stress tests too soft, auditor group warns

Stress tests
designed to assess the health of European banks have not taken some
systemic risks into account, according to a major auditing report
released today.

The European Court of Auditors (ECA) has found “shortcomings for assessing resilience against systemic risk” in the stress tests carried out by the European Banking Authority (EBA), raising questions over the risk-assessment measures that the body uses to predict how banks will perform under tough conditions.

According to the
report, the EBA found that “negative
effects of the shock were concentrated in several large economies
most of which performed quite well during the last recession, rather
than on the countries that were most affected by that crisis”.

The ECA added: “Owing to the lack of resources and the current governance arrangements, the EBA was not in a position to ensure comparability and reliability of methods, practices and results, as envisaged in the regulation. Instead, it had to rely primarily on national supervisors. On the positive side, a large amount of information was published.”

Late last year the EBA published results showing that every financial institution in the EU passed its “adverse scenario” stress tests in a report that was welcomed by tRead More – Source
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